The foreign room for HDFC Bank has risen to 25.9 per cent for the quarter ended June, making it eligible for a significant bump-up in weight at the upcoming MSCI index revision in August.
HDFC Bank’s weight in the MSCI EM Index is about 3.8 per cent. Post-rejig, this could jump to 7.2-7.5 per cent, potentially bringing in $3.2-4 billion in inflows over six days, according to estimates by Nuvama Alternative & Quantitative Research.
The stock, too, is expected to gain momentum and cross ₹1,900 until the official announcement on August 13. Shares of the bank ended at ₹1,728 apiece on the NSE on Tuesday. Domestic funds, having bought HDFC Bank because of its reasonable valuation amidst an expensive market, should continue to hold, said Nuvama Research.
Foreign room is the proportion of shares still available to foreign investors relative to the maximum allowed. The foreign investment limit in privately held banks is 74 per cent.
India’s weight in MSCI EM, at 19.2 per cent, could cross the 20 per cent mark.